I have noted the public outcry over the recent increase in the price of electricity and thought you might consider the following.
Power in Tonga is generated entirely with imported automotive diesel whose price in July 2004 was 54 cents/litre. As a result of several factors which happened in or around September, mainly four consecutive typhoons in the Gulf of Mexico which significantly cut American domestic production, political instability in Nigeria which similarly cut Nigerian production and a genuine fear that American domestic reserves would not be able to meet the winter demand, Brent Crude went to $54 a barrel which translated to an imported price of 89 cents/litre in Tonga.
The recently elected President of the United States has adopted certain economic policies with which I shall not bore you at this stage but which has resulted in a weakening of the US dollar against most major currencies. The Nymex price today had dropped to $43.41, a drop of 77 cents in a day while Brent futures had last registered at $40.11 in expection of a mild winter in the United States. It was an attempt to stem this decline that OPEC had voted last month to cut production by a million barrels a day.
In spite of the rise of approximately 29 cents/litre for Tonga’s imported oil, Shoreline asked the Tonga Electric Power Board for a temporary rise of 13 cents in the retail price and was granted 11 cents.
Perhaps because oil imports are subject to price control in this country, the two major oil companies serving Tonga choose not to import marine diesel which is not only about 25% cheaper than automotive diesel, but can be used by our generators which shall result in a major reduction in the retail price. As 75% of our oil imports are used for power generation, this attitude strikes me as antagonistic.
One solution would be for Tonga to import its own Marine Diesel for power generation as well as its domestic shipping. The required investment in a pipeline and tank farm is both sound and affordable (less than $10 million).
In my opinion, considering the substantial forces arraigned against the non-oil producing countries by major global financial forces, any claims by certain unethical political candidates to provide, at a stroke, a panacea for the burden of high power costs are false and discussion of how miserable we all feel instead of a solution a waste of time.
Tuesday, 28 Dec 2004.